Office pre-letting returned in strength during the first half of 2015, led by a spike in demand from the banking and finance sector, according to CBRE, the commercial property and real estate services advisor.
Strong economic growth and widespread business confidence during 2015 have resulted in strong levels of occupier take-up, most notably across the key cities of Birmingham, Manchester and Leeds. Deals from the banking and finance sectors (19%), along with business services (16%) and professional services (24%), accounted for 59% of total activity in H1.
Transactional volumes were particularly high in Birmingham, which saw the largest single deal in H1, the 212,000 sq ft pre-letting of Two Arena Central by HSBC as the new UK headquarters for its retail banking division. This is the second major occupational deal involving a bank over the course of three years for the city, which saw Deutsche Bank agree the lease of Five Brindleyplace as a Midlands base in 2013.
Other major UK cities that have benefited from this acceleration of office take-up by financial and professional services include Leeds, which saw Equifax pre-let 19,784 sq ft at 6 Wellington Place, and Manchester, where PwC pre-let nearly 50,000 sq ft at No.1 Spinningfields.
Ashley Hancox, Executive Director, Birmingham Office Agency at CBRE, said:
"Through the first half of the year, UK regional office markets have continued to build upon the growth that firmly took hold last year. In many of the core cities in the Midlands and North of the UK, large professional services and finance organisations have taken advantage of availability of a well-educated, diverse workforce and a new generation of office buildings that are about to appear. This regional appeal has been bolstered by an influx of regional infrastructure investment and regeneration projects, cementing the Midlands' and the North's position as alternative hubs for large corporations. These deals also go some way to counter the perception that these sectors are looking to downsize their UK footprint or offshore operations.
"We expect strong levels of pre-letting activity to continue in H2 2015, which will inevitably put pressure on the limited availability of existing Grade A space across the country. Approximately 2.7m sq ft is currently under construction in the South East and approximately 3.4m sq ft across all other regions to help meet this demand."